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Indirect Cost Recovery Fiscal Fundamentals

Indirect Cost Recovery Fiscal Fundamentals Indirect Cost Recovery Authority: Appropriation Act § 4-2.03(a) References: CAPP Manual 2 CFR, Part 225, (formerly OMB Circular A-87) & 2 CFR, Part 220 (formerly OMB Circular A-21) ASMB C-10 Indirect Cost Recovery What are indirect costs?

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Indirect Cost Recovery Fiscal Fundamentals

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  1. Indirect Cost RecoveryFiscal Fundamentals

  2. Indirect Cost Recovery • Authority: Appropriation Act § 4-2.03(a) • References: • CAPP Manual • 2 CFR, Part 225, (formerly OMB Circular A-87) & 2 CFR, Part 220 (formerly OMB Circular A-21) • ASMB C-10 Financial Reporting

  3. Indirect Cost Recovery • What are indirect costs? • Indirect costs are expenditures incurred for a joint purpose that benefit more than one cost objective. • Indirect costs are divided between agency and statewide. Financial Reporting

  4. Statewide Indirect Cost Allocation Plan • Identifies costs of central support services to agencies and institutions • Allocates only General Fund support to agencies with federal programs • 2 CFR, Part 225 ( formerly OMB Circular A-87) is the Federal guideline • Net central service fixed costs included in agency indirect cost proposal • Used only by those agencies that receive federal grants and contracts Financial Reporting

  5. Statewide Indirect Cost Allocation Plan • Agencies and institutions recover indirect costs from federal government • U. S. Department of Health and Human Services reviews and approves SICAP • Auditor of Public Accounts reviews SICAP • DOA posts SICAP on web after DHHS approval Financial Reporting

  6. Full Costing SICAP Objectives • Identify costs of central support services to agencies and institutions • Allocate General Fund support to nongeneral, nonfederal programs • Those assessed have chance to comment on calculations • Final Assessment Schedule in Appropriations Act “Transfers” section • Reviewed and approved by DPB Financial Reporting

  7. DOA’s ICR Role • Prepare Federal and Full Costing SICAPs • Monitor indirect cost recoveries monthly • Prepare Indirect Cost section of the Quarterly Report • Assist agencies • Review year-end closing reconciliations • Prepare year-end adjusting entries Financial Reporting

  8. Fiscal Officer’s ICR Role • Recover indirect costs if allowable • Record indirect cost recoveries and transfer entries monthly • Maintain adequate documentation to monitor indirect cost recovery • Ensure that year-end balances are correct • Complete year-end reconciliations of indirect cost recovery Financial Reporting

  9. ICR Internal Controls (1 of 3) • Ensure unallowable costs are not charged to federal awards, directly or indirectly • Review the agency organizational structure to determine the appropriate proposal methodology Financial Reporting

  10. Internal Controls for ICR (2 of 3) • Prepare an indirect cost rate proposal or plan according to OMB circulars • Ensure indirect cost rate proposal or plan is submitted, negotiated, and approved by cognizant agency in a timely manner • Apply the approved indirect cost rate against grant awards Financial Reporting

  11. ICR Internal Controls (3 of 3) • Correctly record timely indirect cost recoveries and transfer entries in CARS • Retain work papers to support indirect cost rates or plans • Maintain documentation concerning the restriction of indirect cost recovery from any grants or contracts Financial Reporting

  12. References (1 of 2) • CAPP Manual Topic 20705, Indirect Cost Recovery • Appropriation Act § 4-2.03(a) • Statewide Indirect Cost Allocation Planhttp://www.doa.virginia.gov/Financial_Reporting/SICAP/SICAP_Main.cfm • DOA Directive 3-08, Attachment 28, Direct Billed Central Serviceshttp://www.doa.virginia.gov/Financial_Reporting/Directives/2008/Agency/Att28_Instructions.pdf • 2 CFR, Part 220 (formerly Office of Management and Budget, Circular A-21), Cost Principles for Educational Institutions, 05/10/04 Financial Reporting

  13. References (2 of 2) • 2CFR, Part 225 (formerly Office of Management and Budget, Circular A-87), Cost Principles for State, Local, and Indian Tribal Governments, 05/10/04 • U. S. Department of Health and Human Services, Cost Principles and Procedures for Developing Cost Allocation Plans and Indirect Cost Rates for Agreements with the Federal Government, 04/08/97 Financial Reporting

  14. Contacts • finrept@doa.virginia.gov • 804-225-3804 – voice • 804-225-2430 – facsimile • U. S. Mail: • Financial Reporting – Indirect Cost • Virginia Department of Accounts • P. O. Box 1971 • Richmond, VA 23218-1971 Financial Reporting

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